If you are a sole trader, you are running your own business as an individual. This means you are responsible for managing your own tax and super obligations. Here are some tips to help you stay on top of your tax affairs and avoid common pitfalls.
Keep track of your income and expenses
As a sole trader, you need to report all your business income and expenses on your individual tax return. You can use the business section in myTax or a registered tax agent to lodge your return. To make it easier, you should keep accurate and complete records of your income and expenses throughout the year. You can use accounting software, spreadsheets, or paper-based methods to record your transactions. You should also keep receipts, invoices, bank statements, and other documents that support your income and expenses.
Claim deductions for your business expenses!
You can claim deductions for the expenses that are directly related to earning your business income. These may include:
- Advertising and marketing costs
- Business travel expenses
- Car expenses
- Depreciation of assets
- Home office expenses
- Insurance premiums
- Interest on business loans
- Phone and internet expenses
- Professional fees
- Repairs and maintenance
- Stationery and supplies
- Subscriptions and memberships
You can only claim the business portion of these expenses, not the personal portion. For example, if you use your car for both business and personal purposes, you can only claim the car expenses that relate to your business use. You can use the logbook method or the cents per kilometre method to calculate your car expenses.
Pay tax as you go!
As a sole trader, you may need to pay tax in instalments throughout the year, rather than paying a lump sum at the end of the year. This is called pay as you go (PAYG) instalments. PAYG instalments help you budget for your tax and avoid a large tax bill when you lodge your tax return. You can choose to pay your PAYG instalments quarterly or annually, depending on your income and preferences. You can also vary your PAYG instalments if your income or expenses change during the year.
Set up a superannuation fund!
As a sole trader, you are not obliged to pay superannuation for yourself, but it is a good idea to do so for your future retirement. You can choose to contribute to any complying super fund that suits your needs. You may also be eligible for a tax deduction for your personal super contributions, up to certain limits. To claim a deduction, you need to:
- Make a personal contribution to your super fund.
- Lodge a notice of intent to claim a deduction with your super fund.
- Receive an acknowledgement from your super fund.
- Include the amount of your deduction in your tax return.
Seek professional advice!
Running a sole trader business can be rewarding, but also challenging. You may encounter complex tax issues or need guidance on how to grow your business. That’s why it is advisable to seek professional advice from a qualified accountant, such as A&H Accountants.
We can help you with:
- Preparing and lodging your tax return
- Maximising your tax deductions
- Planning your cash flow and budget
- Choosing the best business structure
- Registering for GST and other taxes
- Managing your superannuation
- Complying with tax laws and regulations
- Resolving any tax disputes or audits
At A&H Accountants, we are committed to providing quality accounting services to sole traders and other small businesses. We have the experience, knowledge, and skills to help you achieve your business goals and minimise your tax liabilities. Contact us today to find out how we can assist you with your sole trader tax matters.
Contact Information:
Phone: (03) 9996 7419
Email: info@aandhaccountants.com.au
Website: https://aandhaccountants.com.au/
We’re eager to hear from you and assist with your Australian tax needs. Remember, at A&H Accountants, we make tax simple.
We Wish you a very Happy New Year!! 😊
